It is estimated that all of store related and 20 of common, Ask an Expert

Accounting

A company currently operates two stores, Uptown and Midtown:
Last year's results Uptown Midtown

Sales revenues $300,000 $400,000
Variable costs (120,000) (140,000)
Contribution margin $180,000 $260,000
Store related fixed costs (100,000) (100,000)
Allocated common fixed costs (90,000) (120,000)
Operating income (loss) ($10,000) $40,000

The company is considering closing the Uptown store because of its sustained operating losses during the last two years. It is estimated that all of store related and 20% of common fixed costs allocated to Uptown can be avoided if the Uptown store is closed. What would be the effect on total operating income for last year if the Uptown store had been closed before Jan 1st?

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M985212

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